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Chinese Investment in Taiwan

Will Taiwan Go the Way of Hong Kong?


Will Taiwan Go the Way of Hong Kong?


As Beijing woos the Taiwanese with lucrative trade and moguls with business interests in China buy up local media, many Taiwanese are asking: Where is economic dependence on China taking us?



Will Taiwan Go the Way of Hong Kong?

By Rebecca Lin
From CommonWealth Magazine (vol. 509 )

"Back in 1997 we hardly felt that anything had changed. But looking back now after fifteen years, Hong Kong has actually changed a lot," notes 42-year-old Charles, a Hong Kong native. Charles graduated from the Faculty of Business and Economics at the University of Hong Kong in 1991. After graduation he found a job at a foreign bank in the then British territory and witnessed the historic handover in 1997 when Hong Kong became a special administrative region (SAR) of China.

In August 2009, three days before typhoon Morakot devastated southern Taiwan, Charles moved to Taipei with his wife and children.

Deep inside Charles harbors highly contradictory feelings for the Chinese motherland, as he is torn between patriotic pride and critical distance. He illustrates his complicated state of mind with an example. Not long ago he went to soccer practice with his child at the school's sports field where a worker was busy repairing the track hurdles. The man kept complaining about the poor quality of the China-made hurdles, saying that Chinese products were the cheapest, but also the worst.

"Although many Hong Kong people resent the mainland Chinese, such talk still feels offensive and makes you feel ashamed," Charles says, reflecting the sentiments of perhaps the majority of Hongkongers.

What lessons can Taiwan learn from Hong Kong's experience with its new Chinese rulers over the past 15 years? How should the island deal with its increasing economic dependence on its giant neighbor?

The Chinese government keeps granting Hong Kong economic favors while deepening its influence in the territory's economy, society and politics. Following the signing of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) in 2003, Beijing continued to open up the Chinese market to duty-free imports from Hong Kong. It also allowed the residents of 49 major Chinese cities, the equivalent of some 300 million people, to visit Hong Kong as individual tourists.

Weaving a China-friendly Media Network

Last year a total of 27.88 million Chinese tourists visited Hong Kong, including more than 18 million individual tourists, for a 24.1 percent year-on-year increase. Chinese nationals accounted for 66 percent of the territory's sightseeing visitors. The Hong Kong SAR government estimates that the influx of Chinese travelers has not only boosted local tourism, but also created more than 50,000 new jobs.

But amidst the tide of support for Hong Kong's economic development flooding in from China, a quiet transformation has been in progress in the local media.

Former Legislative Councilor and human rights activist Christine Loh wrote in her book Underground Front: The Chinese Communist Party in Hong Kong that the vast majority of new owners of Hong Kong media are tycoons with vital business interests in China. These tycoons do not even shy away from buying loss-making Hong Kong media against common sense and entrepreneurial principles. Loh cites as an example Taiwanese billionaire Tsai Eng-meng, chairman and CEO of Want Want China Holdings, who bought a 47.58-percent stake in troubled Asia Television in 2009.

Around the time of the handover, the founders of many Hong Kong business empires not only started growing their businesses in China, but also established intricate personal networks with China's political elite and influential business figures. Some even sit on the National People's Congress, China's parliament, or the advisory Chinese People's Political Consultative Conference. While some have stopped short of taking a political post in China themselves, they secure influence via their offspring, such as property magnate Li Ka-shing, who installed his son Richard Li, chairman of PCCW Limited, in the Chinese People's Political Consultative Conference.

Buying the Hearts of the Taiwanese

The Taiwanese are no strangers to such tactics.

Wang Yi, director of the Chinese cabinet's Taiwan Affairs Office, wrote in the October issue of the Communist Party flagship magazine Seeking Truth that since May 2008, when Taiwanese president Ma Ying-jeou took office, cross-strait relations have seen major progress and breakthroughs. He also stated, "We need to closely follow this key objective for winning the hearts and minds of the Taiwanese people."

As China hands out economic favors to win people's hearts, economic amalgamation seems to be an irreversible trend. The Chinese government is directing its charm offensive first of all at southern Taiwan, where support for the China-averse opposition Democratic Progressive Party (DPP) is particularly strong. Flooding the region with shopaholic Chinese tourists is part of the overall strategy.

Since Taiwan opened its doors to Chinese tourists in July 2008, their numbers have skyrocketed from 90,000 visitors in the first year to 1.29 million visitors last year (for a total of 1.78 million people), who spent NT$115.5 billion islandwide – an amount equivalent to the combined annual revenue of the more than 10,000 restaurants in all of Taipei City.

The southern city of Kaohsiung, long ruled by the DPP, is a prime target for Chinese efforts to win the hearts and minds of the locals with tangible economic benefits. Chinese nationals account for 60 percent of the harbor city's international tourists, a ratio two times higher than the nationwide average of 30 percent.

For Beijing it comes in handy that DPP-controlled southern Taiwan is also a major producer of agricultural products. Under the cross-strait Economic Cooperation Framework Agreement (ECFA), which broadened Taiwanese farm exports to China, such exports grew by 86 percent between 2009 and 2011 despite the overall downward economic trend.

Zheng Lizhong, deputy director of the Taiwan Affairs Office, has toured villages across Taiwan with Taiwanese legislators in tow. Accompanied by much fanfare, such visits aim to demonstrate Beijing's goodwill toward Taiwan's less advantaged such as farmers and fishermen and the "three middles," namely central and southern Taiwan, small- and medium-sized enterprises, and middle- and low-income families.

Increasingly obvious are moves by Taiwanese conglomerates with business interests in China to gain control over Taiwanese or Hong Kong media.

Want Want China Holdings boss Tsai has bought the China Times News Group, one of Taiwan's leading media conglomerates, which owns the Chinese-language newspapers China Times and Commercial Times; China Times Weekly; and two television networks, CTI TV and China Television Co.

Cher Wang, chairwoman of Taiwanese smartphone maker HTC, last year teamed up with Chan Kwok-keung of Hong Kong's ITC Corporation and private equity firm Providence Equity Partners of the United States to buy a 26-percent stake in Hong Kong's leading broadcaster Television Broadcasts Ltd. (TVB).

Jeffrey Koo Jr., the former vice chairman of Chinatrust Commercial Bank (CTCB), and Wang Wen-yuan, president of petrochemicals giant Formosa Plastics Group, are currently preparing to buy out the Taiwanese media outlets of Hong Kong's Next Media Group – including Apple Daily, Sharp Daily, Next Magazine and Next TV – for US$17.5 billion. CTCB is planning to invest in a China-funded bank and the Formosa Plastics Group is active in China with more than 20 companies in the petrochemicals, steel and medical care industries.

China-based Taiwanese entrepreneurs have also been exhibiting a growing appetite for unprofitable Taiwanese media outlets. In 2007 Eric Teng, who is chairman of Singfor Life Insurance and has strong business interests in Shanghai, joined hands with like-minded entrepreneurs to buy the staunchly anti-communist Central Daily News, the official party newspaper of Taiwan's Kuomintang (KMT). The print newspaper was then revamped as an online publication. According to its mission statement, Central Daily News is now devoted to cross-strait peace.

Moreover, the Kaohsiung-based Commons Daily, once reputed to be the largest newspaper in southern Taiwan, is about to be taken over by Global Life Insurance chairman Yeh Chia-ying, who has long maintained cozy ties with Kuo Hua Life Insurance's Ong clan and the Chin Pao San Group of Hong Kong. Another popular newspaper in the south, the Chinese-language Taiwan Times, has repeatedly been the target of takeover attempts.

Buying Media to Gain Political Influence

"You only need to own a media outlet to gain clout in Beijing and protection in Taiwan," notes one media executive who often travels between Taiwan and China. Businesspeople always gravitate toward any position where they can gain an advantage or leverage, he argues. "As long as you don't lose money, it's extremely beneficial."

Given Beijing's sophisticated maneuverings, won't Taiwan follow in the footsteps of Hong Kong?

Ultimately, Taiwan is not Hong Kong.

Sporting sideburns and a pensive look on his face, Wu Jieh-min, research fellow at the Academia Sinica's Institute of Sociology, questions the assumption that Taiwan is doomed to be "hongkongized."

"Ultimately, history hasn't come to an end. There's still a ray of hope," he declares.

Citizens Who Refuse to Be Silent

If Taiwan's civil society and community media choose to remain silent, we will see Hong Kong's history repeat itself in Taiwan, Wu asserts.

"If Taiwan's citizenry hadn't spoken up during the past four years, do you think Taiwan would still be the same now?" he muses.

An outspoken civil society is crucial for turning the tables in favor of Taiwan. And one key reason why Taiwan is not Hong Kong is because the island has a vast array of civic groups, such as the Taiwan Labor Front and the Taiwan Association for Human Rights, and vibrant citizen media.

And then Taiwan has apparently bred a new generation of young people that is more alert politically. Hsu Wei-chun, an associate law professor at Chung Yuan Christian University, points to the thousands of people who took to the streets in September to protest against the Want Want China Times Group's efforts to smear critical journalists and monopolize the island's media. Hsu noticed many young, idealistic faces among them. He feels that young people have begun to shoulder hardships resulting from a distorted economy, to ask what's wrong with Taiwan, and to actively make themselves heard and bring about change.

Even more important is the people's insistence on the one thing that forms the bedrock of a nation – sovereignty.

On an October evening, the crowds enjoy the cool breeze at Kaohsiung's popular Liuhe night market. Groups of Chinese tourists expectantly disembark from a steady stream of arriving tour buses, eager to sample local snacks.

This is also the constituency of Chao Tien-lin, a young DPP lawmaker. Chao notes that the area is packed with hotels and guest houses and so popular with tourists that it is impossible to find a vacant hotel room on weekends. "Even though the Liuhe night market is very green (pro-DPP), everyone distinguishes between making money and sovereignty," he explains.

Taiwan's economic integration with China is already inevitable. But "economic amalgamation will also inevitably give China more opportunities to intervene in Taiwan's local politics," warns Ray Yep, assistant professor at the Department of Public and Social Administration at City University of Hong Kong.

Yet Taiwan's biggest advantages may be its democracy and sovereignty.

As our interview nears its end, Charles confesses that he admires Taiwan a lot. What makes Taiwan so different from Hong Kong? He points to Taiwan's value system as well as its freedom and democracy. "I think even if China had a democratically elected government in the future, half of the Taiwanese would probably still not want to reunite with China."

Translated from the Chinese by Susanne Ganz